All Forum Posts by: V.G Jason

 Hi Jakub, I also like mixing single-family long-term rentals with passive multifamily. I don’t personally focus on specific markets, rather I like diversity. I have assets in AL, AR, CA, FL, GA, IL, IN, MA, MO, MS, OH, OK, PA, TN, TX, WA, and additional assets in Australia, Canada, and Brazil. When it comes to single-family, I like cash flow, so I’m not buying at the moment because both prices and interest rates are too high relative to rents. When it comes to multifamily, my due diligence starts with the operator. I like publicly discoverable operators that you can find easily with a Google search, managing hundreds of millions to a few billion in assets, with a focus on single assets, not funds, at least 10 years of experience in their current form, at least 10 buildings taken full cycle, an excellent track record of delivering outstanding investor returns throughout their history, and deals on offer that are similar to the deals they have completed successful. I like ground-up development, particularly affordable housing, and my ideal deal is building the last multifamily community in an otherwise built out and bustling neighborhood with lots of entertainment, transport, and employment diversity.

 I think a lot of operators believe that govt is gonna try and force interest rates down which they hope will also lower 10 year treasury and rates, so lenders might be trying to lock in higher rates right now and yield spread premiums before rates may go down - which personally i do not see much movement but even a 1/4 - 1/2 point when doing hundreds of millions is a big amount

@V.G Jason

You've brought up multiple obstacles that I am currently facing.

On the family front, my wife and I are not planning to start a family for another 5 -6 years so we are trying to take advantage of the time without kids to pursue this.

The main concern that I have is I just don't see the math working at the price points for duplex that is 500K. I am trying to find examples where people have made this situation work and that can provide the math behind it, but I just haven't found it. I have heard multiple people mention how buying a duplex at that price point can still offer good returns if you house hack, but I haven't seen an analysis that actually supports that.

Funny how the DSCR brokers here, who have no skin in the game, get upset when someone points out that the emperor has no clothes. We heard the same thing in 2006 as the market turned. Instead of addressing the facts in the video, we're supposed to be impressed that someone made 500 of these loans? That's the argument?

We used to hear that the housing market never drops; therefore, it never will. How’d that turn out?

I’m not sure who the video was intended for. Certainly not for the borrowers who take advantage of these loans. Why should they care? Perhaps as a warning to brokers who rely on commissions to keep their resume current? The lenders who own these loans should care, but I doubt Jamie Dimon takes his financial advice from YouTube.

And of course, what the video doesn't mention is that some lenders are now writing 75% DSCR loans. Forget the 1.0+ standard, which at least assumes the borrower can cover PITIA. Now the assumption is they've got extra income just to make PITIA. And that's supposed to be a sound loan?

Do I fault brokers for taking advantage of this? Of course not. But I wouldn’t stick my head in the sand, believing this gravy train will last forever, or get offended when someone points out it won’t.

Hardly clickbait.  Just the wrong audience.

 Yep. The fixed income resurgence has everyone jumping on the bandwagon. The fixed income world was so yield starved for almost 20 years that now everyone thinks secured lending at 6% is the deal of a lifetime. Yields in the mid 6's for insurance companies and pension funds make sense to some extent- it's the inherent credit risk that's a problem. Like you said, the race to the bottom means making riskier loans in order to win deals. 

I think it's a bifurcated problem. DSCR loans are likely appropriately priced at mid 6s to low 7s for long run solvency and sustainability. Credit risk is the wild card - these loans should be incredibly safe at these yields - DSCRs greated than 1.10x, downpayments of 25%, documentable operating skill from the owners, high credit scores, etc. Fix and flip, on the other hand, is and always has been a high risk product. Yields on these should never be below 10%, and even that is on the low side. 12%+ is very realistic given the expected defaults and workouts on these. Just my $0.02.

I suspect we will get back to some place of sanity and reasonableness on all of this over the next few years. A significant fraction of the loans and deals I've been seeing are ticking time bombs. Just a matter of when, not if, they blow up.

Lots of cash on sidelines.